Sunday, June 11, 2017

High court scraps import duty on ethanol in Gujarat

There may be a marginal decrease in fuel prices in the near future as the Gujarat high court struck down the levy on import of denatured absolute alcohol in Gujarat.

The state government had imposed a duty of Rs 3 per litre on import of denatured absolute alcohol, ethanol in this case, from other states. This chemical is important in the oil and chemical industries, and Gujarat has a considerably wide base of these industries. The Centre even mandated 5% blending of ethanol with petrol and diesel to make these fuels greener and cause less damage to the environment. Interestingly, production of any denatured absolute alcohol is not permitted in Gujarat because of its liquor prohibition policy. This chemical is unfit for human consumption.

As the state government decided to levy import duty in 2013, all oil companies including Indian Oil Corporation Ltd (IOC) and Bharat Petroleum Corporation Ltd (BPCL) as well as dealers who import the chemical in Gujarat, moved the high court questioning the taxation policy. They cited various Supreme Court orders to establish that this is a central government subject and the state government does not have the power to levy a duty on import of ethanol.

It was also argued that the state government has a policy to recover the costs incurred on verification of the chemical from importers and users. It was also contended that the governments have been earning enough due to import of this chemical in form of imposition of Value Added Tax (VAT), excise duty and income tax. Hence there is no need for the state government to burden the industries and manufacturers more with additional taxation, said advocate Niyati Shah, who represented one of the petitioners. After hearing the case, a bench of Justice M R Shah and Justice B N Karia quashed the state government's notification imposing the duty of Rs 3/litre on ethanol import in Gujarat.